As expected, Apple yesterday released the financial results for its first fiscal quarter 2020. The revenue in the period was incredible $ 91.8 billion (9% more compared to the same period in 2019), with net profit of $ 22.2 billion (+ 11.5%) and diluted earnings per share of $ 4.99 (+ 19.3%). International sales comprised 61% of all quarterly sales.
As usual, the CEO Tim Cook and the CFO Luca Maestri held an audio conference to announce the results and comment a little on the company’s performance in the last period – and the projection for what is yet to come.
In this event, whether during the speeches of the executives or in the question and answer session with analysts / journalists, they always paint interesting information. And we, of course, follow everything closely to bring you the highlights of the last quarter of the Apple.
The overall picture of Apple’s last fiscal quarter was one of growth in virtually all categories of the company, with emphasis on the popularity of the iPhone 11, the adoption of new services and revenue with AirPods and the App Store.
Before diving into the numbers and growth rate of the categories below, however, it is worth highlighting some other issues raised by Cook and Maestri during yesterday’s conference, such as the Coronavirus outbreak, the company’s educational projects and their investments in health.
Starting with the Coronavirus outbreak, Cook emphasized the donation that Apple made to groups fighting the disease in China. In addition, the company is “monitoring the situation closely”, especially with regard to the company’s supply chain, which is mainly installed in the country and close to isolated areas. In these cases, suppliers are using alternative sources and working to mitigate any loss of production.
Factories outside the isolated areas, on the other hand, had their reopening date moved from the end of this month to February 10 (previously, the Chinese government had expanded the Chinese New Year holiday to prevent the large movement of people momentarily).
In addition, the company closed one of its stores in China and reduced the opening hours of other units to reduce the risks of exposure to the virus. Apple has also adopted additional security measures such as store asepsis and constant temperature measurement for employees.
Teaching programming (Teaching Code)
Cook also highlighted the launch of the new Teach programming curriculum to help introduce more elementary and high school students to the programming world.
Today, millions of students in more than 5,000 schools worldwide use the Apple program curriculum to “bring their ideas to life and develop important skills, including creativity, collaboration and problem solving”.
The Apple CEO also commented on the new health research software, the Research app, from which iPhones and Apple Watches users in the United States can participate in three important studies: Women’s Health Study, Cardiac Study of Hearing Movement and Study – all carried out in partnership with the main academic and research institutions in the country.
Version 1.4 (69.1 MB) Requires iOS 13.2 or higher?? Not available on the Brazilian App Store!
Finally, Cook cited the $ 2.5 billion investment in resources to reduce the California housing crisis; According to the executive, Apple “feels a great responsibility to help the region that always calls home to remain vibrant”, in addition to ensuring that it “remains a great place for everyone to live and raise a family, including those who make both to serve the community as firefighters and teachers ”.
Once again, the iPhone was the flagship of Apple’s revenue. With a collection of US $ 56 billion (+ 8%), Cook explained that the demand for the iPhones 11, 11 Pro and 11 Pro Max was “exceptional”. In the meantime, the iPhone 11 was the best-selling model, having also been the most popular in all weeks of the quarter.
The iPhones market grew by double digits in the US, the UK, France and Singapore – as well as in some emerging markets, such as Brazil, Mainland China, India, Thailand and Turkey.
In addition, satisfaction with iPhones 11, 11 Pro and 11 Pro Max is at 98%, according to the latest survey. Among buyers planning to buy a new smartphone in the next quarter, 84% said they chose the iPhone.
With a share of $ 5.9 billion in total revenue, the iPad (accounting for all models for sale) saw growth in all five geographic segments, highlighting the popularity of the tablet in the following markets: Philippines, Malaysia, Mexico, India , Poland, Thailand, Turkey and Vietnam.
According to Maestri, the tablet’s performance was similar to last year. He also pointed out that approximately half of the customers who bought an iPad in the last quarter were new users – precisely for that reason, the active installed base of the iPad broke a record.
His satisfaction survey was also positive: about 93% of home customers are satisfied, while 92% of business users said they were happy with the device.
Wearables, Home and Accessories
As expected, this category set a new record, with revenues of US $ 10 billion (+ 36.9%). This increase is due to the positive performance in all five geographic segments, setting a record in virtually all markets monitored by Apple, according to Maestri.
Within this category, the most popular items are AirPods and Apple Watch, which had strong demand throughout the quarter.
More than 75% of consumers who purchased an Apple Watch were new users of the watch, so the installed base for this segment has also grown exponentially in recent months.
As for AirPods, Cook admitted that Apple faced supply restrictions for the production of the Pro version, released last October.
Despite this, the company does not specify how many units of the wireless headsets were sold – and, as the total revenue encompasses other products, we will have to wait for surveys by specialized companies to estimate sales for this quarter; the latest estimate was 60 million units.
Here, too, no surprise: the category reached a new historical record, accumulating revenue of US $ 12.7 billion in the last quarter (+ 17.5%). Once again, double-digit growth was seen in all geographic segments, with an emphasis on the App Store and new streaming (Apple TV +, Apple Arcade, Apple News + …) from Apple.
Speaking of services, Maestri says that Apple has more than 480 million paid subscriptions adding up to all the company’s platforms (Apple Music, Apple TV +, Apple News +, Apple Arcade and iCloud), 120 million more than in 2018 That number, however, is expected to grow to half a billion this quarter, while by the end of the year the Cupertino giant expects to reach 600 million subscribers.
As we said, one of the highlights was the App Store. Earlier this month, we reported that the app store raised $ 1.42 billion between Christmas and New Year, which already indicated the increase in revenue from this platform in the last quarter.
According to Maestri, the third-party subscription business (offered by developers within apps) increased by almost 40% compared to 2018.
Apple Music, iCloud and AppleCare +
In addition, Maestri pointed to the record revenue of Apple Music (but did not specify the number of subscribers to the platform), iCloud and AppleCare +, which in turn expanded to even more countries and saw a high adoption rate in the month of December.
Apple’s shares appreciated several percentage points during the last quarter – and continue to break records this quarter. According to Maestri, the company took back nearly $ 25 billion from shareholders and began a $ 10 billion repurchase program in November – which resulted in the “retirement” of 30.4 million shares.
Apple also repurchased 40 million shares through open market transactions, paying $ 3.5 billion in dividends.
Today, $ AAPL closed at a record high, worth $ 324.34 – the peak during the negotiations was a record, US $ 327.85. With that, the company is now worth $ 1.422 trillion – Microsoft is behind, worth $ 1.282 trillion, followed by Alphabet ($ 1.005 trillion).
Questions and answers
When asked how Apple was evaluating the success of Apple TV +, its streaming video, Cook replied that the company is analyzing the number of subscribers to the platform, despite not disclosing them publicly.
We are mainly measuring the number of subscribers. As you can see by the way we launched the product, we started with a very aggressive price of US $ 4.99 and, in addition, we have a package in which if you buy almost any device, you get one year for free. Therefore, we are very focused on subscribers. That said, the product itself is about storytelling. And we think that if we do it well, we will find that there will be a number of those who will also be critically acclaimed. We are seeing this with the “The Morning Show”, “Little America” and others.
There was also no shortage of questions about 5G. However, as we might expect, Cook evaded the question by saying only that he does not comment on future Apple products, and that 5G is only in the initial phase of global deployment:
You know, we don’t comment on future products, so I try to keep my distance on the subject. With regard to 5G, I think that we are in the beginning of its implementation globally. Obviously, we could not be more proud of our training and we are also very excited about our sales funnel and do not change our position for anyone.
The quarter in graphics
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Projection for the second fiscal quarter of 2020
Maestri predicts that revenue for the second fiscal quarter of 2020, which ends in March, will be between $ 63 and $ 67 billion. The wider than usual margin of difference is due to uncertainties related to the public health situation in China, aggravated by the Coronavirus outbreak.
In addition, the company expects a gross margin of between 38% and 39%, operating expenses between $ 9.6 and $ 9.7 billion and other expenses of approximately $ 250 million. Finally, the forecast is that the tax rate will be around 16.5%.